Gold rallied for 1.72% on Thursday to close above the 50 day MA.
Notice how RSI 05 is embedding in overbought. That signals that gold has begun the advancing phase of a new intermediate cycle. That aligns with gold being in a daily uptrend. Forming a swing low and above the upper daily cycle band indicates a continuation of the daily uptrend. and signals a cycle band buy signal.
The initial surge out of the DCL caused stocks to get stretched above the 10 day MA. Stocks have been coiling to allow the 10 day MA to catch up to price. Stocks should go on to break above the declining trend line as they rally out of their daily cycle low.
Notice the change in behavior for RSI 05. Prior to the DCL, RSI 05 was embedding in oversold which is characteristic of the declining phase of the intermediate cycle. That is beginning to change. If RSI 05 embeds in overbought that will signal that stocks are now in the advancing phase of a new intermediate (weekly) cycle.
The dollar found support at the 50 day MA on Tuesday.
The dollar printed its lowest point on Tuesday, day 42, placing placing the dollar very deep in its timing band for a DCL. Wednesday’s swing low and close above the 10 day MA signals the new daily cycle. Notice that the RSI 05 pattern is changing – which indicates that the dollar is beginning the declining phase of its intermediate cycle. That aligns with the dollar being in a daily downtrend. The dollar will remain in its daily downtrend unless it closes back above the upper daily cycle band.
The rally out of the day 60 DCL had stocks close back above the lower trend line of the megaphone pattern.
Stocks spent the past week consolidating above the lower trend line.
This consolidation is allowing the 10 day MA to catch up to price. The weekly cycle indicates that this should be the 1st daily cycle of the new intermediate cycle. If so, then this daily cycle should break above the 50 day MA to form as a right translated daily cycle.
The dollar closed above the 10 day MA and the declining trend line on Friday so will will label day 18 as the DCL. The dollar should go on to turn the 10 day MA high as it rallies out of its DCL. Currently, the dollar is in a daily downtrend. The dollar will remain in its daily downtrend unless it can close back above the upper daily cycle band.
Stocks are on day 12 for the daily cycle and RSI 05 still has not embedded in overbought.
During the advancing phase of the intermediate cycle, RSI 05 tends to get embedded in overbought as evidenced in early April. But notice as stocks broke out to a new high in late April and early May those breakouts were followed by 2 quick bearish reversals in RSI. That could be an early warning that an emerging bearish RSI pattern is beginning to emerge.
Now that stocks are rallying out of their DCL we need to keep a watch on RSI. If it begins to embed once again in overbought, that would indicate a resumption of the intermediate cycle advance. However, a quick bearish reversal would indicate an end to the intermediate cycle advance and the beginning of an intermediate cycle decline. We will use a close below the 4200 breakout level as a warning and a close below the 10 day MA to signal the daily cycle decline.